The words “accounts , Deferred Tax schedules” has been included in sub paragraph (ii) above so as to ensure that a claim for an underprovided Deferred Tax liability is included.
1.2.14 “ Tax Cost ” means:
(i) the amount of any Underprovision and any Overstatement less any Overprovision and less any Understatement;
This is the replacement definition instead of “Tax Liability”. It is the definition for the main operative clause: it uses the differences between the balances in the accounts and the tax liabilities and assets to define the extent of the claim available to the Buyer. It brings Deferred Tax provisions within the ambit of the tax covenant. (ii) the loss or reduction in the amount of, or the setting off against income, profits or gains earned, accrued or received on or before the Completion Date or against any Tax Liability, of any Post-Completion Relief or Buyer’s Group Relief in circumstances where, but for such loss, reduction or setting off, the Company would have had a Tax Cost in respect of which the Buyer would have been able to make a claim under this Deed, in which case the amount of the Tax Cost shall be the amount of Tax saved or relieved by the Company as a result of such set off or use; We have only included express reference to the last two types of Buyer’s Relief in sub- paragraph (iii) above on the basis that Deferred Tax Relief and Accounts Relief are already covered in sub-paragraph (i). 1.2.15 “ Underprovision ” means the net amount by which the liabilities included in the Completion Accounts relating to Tax (including provisions for Deferred Tax) are less than the Accounts Value of the Tax liabilities, and also means the extent to which any amounts paid under the Corporation Tax (Instalment Payments) Regulations 1998 are less than the Accounts Value of the Tax liabilities, except in each case to the extent that the Underprovision results from a change in rates of taxation or any change in tax law or practice, in each case with retrospective effect This is using the figures in the accounts in order to measure loss. Provisions for Deferred Tax are, once again, included It is this definition which provides the Buyer with the protection in respect of underprovisions for deferred taxation. 1.2.16 “ Understatement ” means the net amount by which the assets in respect of Taxation (including in respect of deferred tax) included in the Completion Accounts are less than the Accounts Value of the Reliefs available to the Company except to the extent that such Understatement results from either the utilisation of a Post-Completion Relief or Buyer’s Group Relief, or a change in rates of taxation or any change in tax law or practice, in each case with retrospective effect.
Made with FlippingBook Learn more on our blog